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Section 35AD

This sections lists ­­­Certain Specified Businesses.

On such businesses, Whole  expenditure is allowed during the first year, whether capital or revenue,

Hence,even on fixed assets, depreciation not claimed, full fixed asset value can be claimed as expense

On certain business,150% deduction available while on others 100% deduction available (both capital and revenue)

Now 100% Deduction for all business

 

COMPARISON

NORMAL BUSINESS

SECTION 35AD BUSINESS

Revenue Expenditure

 Deduction Available

Revenue Expenditure

Deduction Available (100%/150%)

Capital Expenditure

Depreciation Available

No depreciation on Land/Financial Instrument

Depreciation start from Date Asset put to us 

Capital Expenditure

 Deduction Available (100%/150%)

No Deduction on Land/Financial Instrument /Goodwill

 Deduction start from year Business Commenced

Treatment of Loss

Loss of one Business can be Carry forward and

Adjusted with Income of Some other Business

 Remaining can be Carry forward for 8 years

In future,can be adjusted against PGBP Income only

Treatment of Loss

Loss of Specified Business can be Adjusted with Profit of Any other Specified Business

Remaining can be Carry forward for Indefinete period

In future,can be adjusted against specified business profit only

 

 

List of Business who can claim 150% Deduction 

-ex-

i) Setting up and operating a cold chain facility;
(ii) Setting up and operating a warehousing facility for storage of agricultural produce;

(iii)Production of fertilizers in India

(v) building and operating, anywhere in India, a hospital with at least 100 beds for patients;

(vi) developing and building a scheme of affordable housing (Scheme framed by Centran Government/State Government) and notified by CBDT

All these should commence business on or afte 1/4/2012 to claim 150% deduction

 -eex-

150% Deduction Business List Removed

EARLIER NOW

On certain business,

150% deduction available
while on others 100% deduction available (both capital and revenue)

150% Deduction now removed
In all cases,now 100% Deduction

List of Business Getting 150% Deduction

  1.  Setting up and operating a cold chain facility;
  2. Setting up and operating a warehousing facility for storage of agricultural produce;
  3. Production of fertilizers in India
  4.  Building and operating, anywhere in India, a hospital with at least 100 beds for patients;
  5. Beveloping and building a scheme of affordable housing (Scheme framed by Centran Government/State Government) and notified by CBDT
Now these are covered under 100% deduction


List of Business who can claim 100% Deduction 

-ex-

Business commenced on or after 1/4/2014

  • Laying and operating a slurry pipeline for the transportation of iron ore.
  • Setting up & operating a semiconductor water fabrication unit, if such unit is notified by Board as per prescribed guidelines.

 

Business commenced on or after 1/4/2012

Setting up and operating an ICD or CFS (inland container depot or a container freight station) notified or approved under the Customs Act, 1962;

Bee-keeping and production of honey and beeswax; and

 

Business commenced on or after 1/4/2010

(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of agricultural produce;

(iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;

(iv) building and operating, anywhere in India, a hotel of two-star or above category as classified by the Central Government;

(v) building and operating, anywhere in India, a hospital with at least one hundred beds for patients;

(vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation, framed by the Central Government or a State Government, as the case may be, and notified by the Board in accordance with the prescribed guidelines;

(vii) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in accordance with the prescribed guidelines;

(viii) production of fertilizer in India;

(xi) setting up and operating a warehousing facility for storage of sugar;

 

Apart from this,those business on whom 150% Deduction was available and now 100% is available

  1.  Setting up and operating a cold chain facility;
  2. Setting up and operating a warehousing facility for storage of agricultural produce;
  3. Production of fertilizers in India
  4.  Building and operating, anywhere in India, a hospital with at least 100 beds for patients;
  5. Beveloping and building a scheme of affordable housing (Scheme framed by Centran Government/State Government) and notified by CBDT

 


 

Capital Asset to be used for 8 years for Specified Business.

Period of 8 years start from the year asset is acquired

If such asset is used for some other business (other than specified business),

Then

Amt taxable under PGBP is

Deduction Claimed under PGBP

Less

Normal Depreciation u/s 32 (assuming No 35AD)

PGBP Income

Note:-This provision is not applicable for Sick Industrial Companies.

 

Section 35AD Assets Sold/Discarded/Demolished (Section 28)

In this case, Sale Proceeds if any will be taxable as PGBP as per Section 28

(This does not cover case, where Asset used for some other business )

 

Section 35AD Assessee can't claim

  1. Chapter VI-A Deduction(Certain Profit linked deductions like Section 80IA etc)
  2. Section 10AA Exemption (New Amendment in FY 2014-15)

Regarding the same business.

 


 

Word 'new' Removed for Hotels/Hospitals

We know that Loss of One Specified business can be adjusted against Profit of other Specified business

Exception to this rule is 2 or more star hotels or 100 or more bedded hospitals)

Example

If a person has 2 hotels,

Profit of one hotel can be adjusted against loss of another hotel even if that hotel is new

This can be done even if 1 hotel is before  1/4/2010 and other hotel is on or after 1/4/2010

Same is the case for hospitals

However,for other businesses covered in this section this adjustment cannot be done

 

  1. Income Tax
  2. PGBP Income
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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